1MDB board should be sacked for incompetence over RM1.5 billion commissions, says DAP

Petaling Jaya Utara MP Tony Pua says there are no excuses for the prime minister not to sack the 1MDB top management for incompetence. – The Malaysian Insider file pic, October 30, 2014.

Prime Minister Datuk Seri Najib Razak should sack the top management of 1Malaysia Development Berhad for incompetence over the payment of RM1.54 billion in commissions to investment banker Goldman Sachs for fundraising, a DAP lawmaker said today.

Petaling Jaya Utara MP Tony Pua said there was no justification for 1MDB to pay 10% or RM1.54 billion in return for two 10-year loans amounting to RM15.2 billion raised in May 2012 and March 2013 by Goldman Sachs.

"The 10%, or RM1.54 billion, was exorbitant because investment banking fees for funds raised rarely exceeded 2%, especially for multi-billion dollar loans or bonds," he said in a statement.

Citing Tenaga Nasional Berhad as an example, Pua said TNB had raised US$350 million and paid only 2% in fees and expenses.

"Even for larger fundraising exercises by Penerbangan Malaysia Bhd, US$1 billion was raised with only 0.5% paid in fees and expenses," he added.

At national level, the governments of Mexico and Uruguay issued bonds amounting to US$3.9 billion and US$2 billion by deducting only 0.2% and 0.1% for fees and expenses respectively.

"Therefore, the logical question which I had asked earlier was, who was paid these certain commissions, fees and expenses amounting to RM1.54 billion?"

Pua said there were no excuses for Najib not to sack the 1MDB top management as they are clearly incompetent fools, including 1MDB chief executive officer Mohd Hazem Abd Rahman.

"Najib is not only the Prime Minister, he is also the Finance Minister and the chairman of the 1MDB board of advisers," Pua said.

"In fact, the entire 1MDB board of directors must be taken to task for failing its fiduciary duties to ensure that the management performs its tasks in a responsible manner.

"1MDB is accountable to its main shareholder, which is Putrajaya," Pua said. He also called for board chairman Tan Sri Lodin Wok Kamaruddin to be held accountable.

Pua said Lodin, who is also the chief executive of the Armed Forces Fund (LTAT), must account for why the 1MDB Board had been negligent in checking on such incompetence and idiocy.

Yesterday, The Edge Financial Daily reported that Goldman Sachs said that the “certain commissions, fees and expenses” referred in the loan offer documents “are standard terms used to describe part of Goldman Sachs’s compensation for the risks assumed in underwriting the bonds in question”.

Goldman Sachs corporate communication head in Asia Pacific, Edward Naylor, said that “other than legal and accounting firms providing professional services, no fees or commissions were paid by 1MDB or Goldman Sachs to external third parties in connection with these transactions, nor have we ever been asked by 1MDB or others to pay such fees or commissions”.

However, Goldman Sachs refused to explain why the “certain commissions, fees and expenses” were so much higher than the industry norm, and what other clients were charged by them. 

Other fund-raising exercises for Equisar International Inc, Apple Inc and the Mexico Government where Goldman Sachs was involved showed that the fees and expenses amounted to only 1.3%, 0.3% and 0.2% respectively.

- TMI